Update: When we published this Alert on March 29th, the then-current guidance from the Department administering this law was that July 1st was the deadline for employers to comply with the poster and notice requirements for existing employees. Since we published the Alert, the Department released updated guidance stating that notice and poster deadline for existing employees is June 30th. This Alert has been revised to reflect the new date. We have also added clarifying language regarding the employer and employee contribution requirements for employers with less than 25 Massachusetts employees confirming that the employer is not responsible for the employer portion of the medical leave contribution.
This evening, March 29, 2019, the agency responsible for administering Massachusetts Paid Family and Medical Leave (PFML) issued its highly anticipated PFML regulations. As employers (and employment attorneys) scramble to interpret these regulations and prepare for implementation, we are writing to tell you what you need to know right now about PFML and to get ready for July 1, 2019, which is an important date for employers and PFML compliance. The draft regulations can be read here.
We also want to let you know that we will issue a series of biweekly updates and alerts between now and July 1, which will dig into the most important PFML issues and contain advice for Massachusetts employers preparing for July 1 compliance.
While July 1, 2019, is an important date with respect to PFML compliance, the majority of the PFML law does not take effect until January 1, 2021. As of January 1, 2021, private employers with Massachusetts employees will be required to provide covered individuals with paid medical leave, and as of July 1, 2021, such employers will need to provide covered individuals with paid family leave. Both types of leave are funded through a new payroll tax, which goes into effect July 1, 2019.
Eligible employees may take up to twelve (12) weeks of paid family leave per benefit year to care for family members, and up to twenty (20) weeks of paid medical leave in a benefit year to attend to their own serious medical needs, but the total combined benefit leave (family and medical) allowed is capped at twenty-six (26) weeks. PFML law created a new state agency—the Department of Family and Medical Leave—to administer the program. This department issued the regulations this morning.
What you need to know right now
By June 30, 2019, all Massachusetts employers must display the PFML poster (found here) in a location where it can be easily read. Further, employers must notify all W2 employees and 1099-MISC contractors in writing about PFML benefits, their (both workers’ and the employers’) payroll tax contributions and instructions on how to file a claim for leave and benefits. This notice obligation will be ongoing, as employers will be required notify all new W2 employees (not more than thirty (30) days from the date of hire) of their rights, and an employer will have to provide a similar notice of rights to each 1099-MISC contractor. Finally, employers must collect written acknowledgements from their employees and contractors, confirming receipt of the required notice. If a worker refuses to sign the written acknowledgement, PFML provides the employer can substitute a signed statement indicating the worker’s refusal.
Employers should consider providing the required notice to their employees and contractors well in advance of June 30.
On July 1, 2019, Massachusetts employers without an approved exemption (discussed below) will be required to begin funding a state trust fund called the Family and Employment Security Trust Fund in preparation for 2021 when workers can begin taking leave and claiming PFML benefits. To do so, employers will be required to contribute to the fund at a rate of 0.63% of each employee’s wages up to the Social Security Administration’s annually calculated contribution and benefit base ($132,900 in 2019)—0.52% of the wages will go toward medical leave, while 0.11% will go toward family leave (for a total of 0.63%). If an employer makes payments to a 1099-MISC contractor, the employer must report the contractor’s name and social security number, and the amounts paid to the contractor.
While employers are responsible for remitting the full contribution, they may deduct from an employee’s wages to cover the employee’s share of the contribution. For the family leave portion of the contribution, employers may deduct up to 100% of the amount needed from an employee’s wages. For the medical leave portion of the contribution, an employer with twenty-five (25) or more employees may deduct up to 40% of the contribution amount from an employee’s wages. Notably, employers with fewer than twenty-five (25) employees will not have to pay the employer portion of the medical leave contributions.
Employers will submit their payment quarterly via MassTaxConnect. While employers must begin collecting on July 1, 2019, the first payment will not be due until October 1, 2019.
Employers may be eligible to apply for an exemption from the family leave portion, medical leave portion, or both portions of PFML (and the associated contributions) if they maintain their own paid family and/or medical leave policy/benefit that meets certain requirements. Exemption applications will open April 29, 2019, and will be submitted through an employer’s MassTaxConnect account. Approvals will be issued for one year and must be renewed annually. The law has set very specific requirements for an employer to qualify for an exemption, most notably that for a private policy/plan to qualify, it must provide employees with benefits that are equal to or greater than the benefits provided by the PFML.
Timeline of key events
- March 29, 2019: Regulations published
- April 29, 2019: Applications for exemptions open
- May 31, 2019: Deadline to provide notice
- July 1, 2019: Payroll deductions begin
- October 31, 2019: Payroll contributions for the first quarter due
- January 1, 2021: Employees can begin taking paid medical leave
- July 1, 2021: Employees can begin taking paid family leave
Over the coming weeks, we will continue to provide biweekly updates about PFML to help ensure employers fully understand their options and obligations. We will also be digesting the regulations issued today and sharing our thoughts and information about important provisions in the regulations.
Nixon Peabody labor & employment attorneys are available to assist you in navigating these updates in Massachusetts law.